From medieval conmen persuading people to hand over hard cash for worthless ‘holy relics’, to Charles Ponzi promising amazing returns on the back of earlier victims’ money, fraudsters have always been with us and probably always will be. While this is all too true, we can make life a lot tougher for fraudsters – but we need to move rather faster than we have done to date.
A case in point is the pension scam. Pension scams emerged a few years ago, when fraudsters realised that some people would go to considerable lengths to get their money out of their pension schemes before the normal minimum age of 55. They persuaded victims to transfer their savings to a different pension scheme which would allow them to withdraw their money as a lump sum. Even where these schemes were not themselves fraudulent – the money didn’t disappear altogether – they failed to mention that there would be a hefty tax bill for breaking the rules, not to mention their often extortionate fees for arranging it. Many people found themselves with little or nothing left.
Pension scams have morphed and multiplied since then, particularly following the Government’s ‘freedom and choice’ reforms which mean that you can now withdraw all your savings in cash once you reach 55 rather than having to purchase an annuity/guaranteed income. Typically, fraudsters call you out of the blue, often offering a free ‘pensions review’ (sometimes pretending to be approved by the Government), and either persuade you to transfer your money into worthless investments (for example, self-storage units), or simply steal the money. An estimated £43m has been lost since ‘freedom and choice’ was announced in April 2014, but because of under-reporting it could be much more – the self-storage case, under investigation by the Serious Fraud Office, attracted £120m. What’s more, a pension provider who is asked to transfer money to another pension scheme that it suspects is fraudulent, and is trying to protect the consumer, may be powerless to stop it – the High Court ruled in early 2017 that a particular pensions company could not stop such a transfer.
We saw light at the end of this particular tunnel when the Government announced that it would consult on a ban on pension cold-calling in December 2016, but its response to the consultation was delayed because of the election, and in the meantime the scams continued.
So Age UK is very pleased that the new Pensions Minister, Guy Opperman MP, has now announced that a ban on all pensions calling will indeed go ahead – including approaches by text and email – and that there will be new restrictions on pension scheme transfers. This will mean that we and other organisations can put over a clear message – if someone contacts you out of the blue wanting you to transfer your pension, or offering a ‘free’ pensions review – don’t respond, it’s a scam. However, we are still waiting to hear when this will actually start, because legislation is needed.
Of course, this is not the end of the scammers. They no doubt will move on to other ways of parting people from their money. So while we welcome this announcement, we will be pressing the Government to bring this change in as soon as possible, and regulators and law enforcement agencies to act quickly to close down scams as they emerge. Indeed, perhaps the most alarming thing about pension scams is that it’s taken so long to get to this stage. We need to make life a lot tougher for the fraudsters in future!
Anyone concerned that a possible pension scam should contact The Pensions Advisory Service (TPAS). Call them on 0300 123 1047 or visit the TPAS website for free pensions advice and information.